Savers will find it hard to put money aside in 2011

Britain's army of savers could find it impossible to find the spare cash to
put aside next year, a leading think tank has warned.

Rising levels of inflation could mean that savers have to use all their money to pay the bills and find themselves unable deposit any money in a bank or building society.

The warning came as official figures indicated that the cost of living jumped in November because of rising clothing and food prices. The Consumer Prices Index climbed from 3.2 per cent to 3.3 per cent.

Even if they did have the spare cash, the dearth of decent savings products was laid bare last night by figures which showed that there were just three accounts – out of a total of 2,203 on the market – paid a real rate of return for higher-rate tax payers.

The Centre for Economics and Business Research said: "Both ourselves and the Office for Budget Responsibility foresee inflation outstripping average earnings growth next year, which would entail an erosion of household spending power.

"Consumers this year appear to have reduced their propensity to save to maintain their living standards and there is limited potential for them to do the same next year. This is why we expect 2011to be a tough year for households, even as the economy grows."

Most economists fear that even though the recession finished a year ago and that the economy is on track to recover steadily next year, the average person's salary is not climbing as quickly as the cost of living.

The Office for Budget Responsibility, the independent body appointed by George Osborne to scrutinise the Government finances, forecasts that next year inflation will average out at 2.8 per cent, as measured by the Consumer Prices Index. This is noticeably higher than its forecast for wage growth, which it predicts will rise by 2.2 per cent.

Those that do have spare money to invest have few if any options open to them.

MoneyFacts, the personal finance website, calculated that for those that have to pay 40 per cent tax on their earnings, it was a waste of time depositing their money in the great majority of savings accounts, because they could not keep pace with the rising cost of living.

The Office for National Statistics said that inflation, as measured by the Retail Prices Index jumped from 4.5 per cent in March to 4.7 per cent in November. The RPI is widely accepted as the truest measure of the cost of living because it includes housing costs.

Just one account, an Independent Savings Account from Santander, can beat this rate, offering a return of 5.5 per cent, but only for customers prepared to adhere to strict conditions.

Official data from the Bank of England has already indicated that savers are putting less money aside each month. The so-called savings ratio – a measure of what proportion of a family's monthly income they save – has fallen from 7.7 per cent a year ago to just 3.2 per cent.

Victoria Mayo, spokesperson for Moneyfacts, said: "Inflation continues to antagonise prudent savers who are already struggling to achieve a competitive return on their money.

"Those who rely on their savings to supplement their income have been hardest hit, many of whom are pensioners."